Many people never – or only rarely – check up on what’s in their pensions. Even if you are among the more diligent, you might not get much beyond the headline ‘projected income’ figure.
That is of course important, but there will other useful information on annual statements that’s worth a look.
And if you have an online log-in, you can make on the spot adjustments that might improve your chances of a comfortable retirement.
We have therefore compiled a practical guide on how to check your work fund is up to scratch, so you can make the most of even a brief visit to an online pension account.
How to carry out a pension check: What to zero in on when logging on to your account
Some 16 per cent of retirement savers have never reviewed their pensions and 24 per cent do so less than one a year, according to research by financial services provider People’s Partnership.
That compares with 20 per cent who check once a year and 11 per cent who have a look every six months, the survey of around 1,000 pension savers found.
Nine per cent of men surveyed said they reviewed their pensions once a week or more, as did 1 per cent of women.
‘Many workers are ill-prepared for retirement, which is a concern given that we know that millions of workers are not saving enough,’ says Kevin Martin, group director of customer services at People’s Partnership.
‘There are simple steps that a person can take to ensure that they are better prepared for retirement, including signing up for an online pension account, naming a beneficiary and ensuring your details are updated so your provider can stay in touch.’
1. Check your work pension online
This might sound an obvious thing to do, but the survey above shows just how many people never bother.
If you are receiving a letter every year and this provides enough information to keep a general eye on things, that might be fine when retirement is many years away.
However, pension providers have many tools to check if you are on track, and if you are in a defined contribution scheme you might want to change how much you are putting in each month and how your pension is invested.
When it comes to reviewing investment funds, you can research the charges, risk levels, and performance to see if you can do better.
‘Signing up for an online pension account with your pension provider is a simple process, as typically all you need is your National Insurance number as well as your unique customer number, which you can find in the information pack that was sent you when you joined your pension provider,’ says Mr Martin.
‘Once you are up and running you can check your pension fund value, change the date when you intend to retire, and change your address if you move house and a whole lot more, including changing how your pension savings are invested or transferring other pensions.’
2. Check your pension income projection
This will only be an estimate but when added to projections for any other pensions and your state pension forecast, it will give you a general idea of what your total income might be in retirement in today’s money.
Compare this figure to your salary now, bearing in mind that some everyday costs like a mortgage and travel expenses might no longer be part of your budget when you are older.
An influential measure by industry group the Pensions and Lifetime Savings Association suggests what income single people and couples might need for a basic, moderate and comfortable retirement.
Its calculations do not include housing costs, which you will need to factor in if these will still be an issue.
The income amount shown online or on your annual statement will give you an idea how much an individual pension will be worth at your specified retirement date if you maintain the same level of savings, says Martin.
‘It must always be remembered that this indicative figure is subject to investment performance. The statement gives you an indication of how much that could give you in terms of annual income.’
The pension income you may secure in retirement is not set in stone, and will be affected by factors such as how much you save between now and retirement, says Aviva’s head of savings and retirement Alistair McQueen.
He suggests using one of the many free pension calculators available online to estimate your possible income in retirement, even though this amount is just a guide and not guaranteed.
‘Is your projected income enough? A very common, and understandable, pension question is ‘how much money will I need in retirement?’. The tricky reality is that the answer to this question will be different for different people,’ says McQueen.
‘A very simple rule of thumb is to aim for an income in retirement equivalent to at least half that you have been earning during your working life.
‘It is probable that we can meet our needs in retirement with a smaller income because, for example, we will have no work-related expenses, we may have paid-off our mortgage, and we will pay no National Insurance on our pension income.’
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3. Make sure personal details are up to date
‘Pension providers will regularly keep in touch with you about your pension savings by post or digitally, so it’s vital providers have your up-to-date contact details such as home address, telephone number and email address,’ says Martin.
‘These can all be easily updated in your online account.’
4. Add or change the name of your beneficiary
Decide who you want to benefit from your pension if you die, or change the name if your personal circumstances have changed, for example if you have married or got divorced.
‘It’s really important for your pension provider to understand who you would like to benefit in the event of death,’ says Martin.
‘Without this information the person you wish to benefit might not benefit and it will take a long time to make a payment. You can add or change your beneficiary via your online account or by getting in contact with your provider.’
5. Track down your old pensions
You might have left a trail of pensions behind you after changing jobs, so you will need to keep on top of where they all are and ensure providers have your current contact details.
It’s a good idea to carry out similar checks to the above ones on older as well as current pots, especially if you saved substantial sums into them while with a past employer.
Think about whether to merge your old pensions, though doing this will not always be to your advantage.
‘It’s estimated that there are as many as 2.8million lost pension pots in the UK. Look through paperwork or old payslips to see who the provider was of pensions that you previously saved into,’ says Martin.
‘If you can’t remember and are unable to find their contact details, then try the Government’s Pension Tracing Service.‘
